A clear pattern of moderating growth has established itself in the retail industry. U.S. retail sales fell 1% in March from February, marking the second straight monthly decline. The decline was broad-based, with sales falling in most major categories, including electronics and appliances, furniture, building materials, and clothing. Excluding gas stations, retail sales fell 0.3%. The retail sector is not in recession, but shoppers are more cautious, reflected in their behaviors and purchasing decisions as the days of rapid growth are firmly behind us.
The national retail vacancy rate remained unchanged during the first quarter and stood at 4.2%, with malls and shopping centers seeing minimal vacancy changes. Physical retail spaces continue to attract tenants and maintain occupancy rates. Average retail asking rents rose to $24.00 per square foot in the first quarter, an increase of 1.3% over the quarter. The upward rate trend indicates a strong demand for retail space and a growing desire for in-person shopping experiences.
Retailers signed over 18,000 individual leases spanning 57 million square feet in the first quarter of 2023 and was driven by growth in store counts from quick-service restaurant brands, discounters, and off-price retailers. Additional demand has also increased leasing volume from fitness centers and experiential tenants. After accounting for 8-10% of all retail leasing activity each year since 2015, experiential retailers accounted for approximately 15% in 2022.
Retail space under construction stands at 66.4 million square feet, with 9.2 million square feet of new retail space delivered in the first quarter of 2023. The retail market experienced 9.5 million square feet of absorption in the first quarter of 2023. Analysts suggest 2023 will be the “year of the store,” with retailers hedging their bets on brick-and-mortar as an alternative option to shopping online. This year’s outlook supports that theory, with 5,200 stores slated to open and 2,800 to close.
Download the U.S. Retail Market Statistics infographic here: 1Q23RetailStats